In this paper, we compare how two different types of political regimes—direct versus representative democracy—redistribute income toward the relatively poor segments of society after the introduction of universal and equal suffrage. Swedish local governments are used as a testing ground since this setting offers a number of attractive features for a credible impact evaluation. Most importantly, we exploit the existence of a population threshold, which partly determined a local government's choice of democracy to implement a regression‐discontinuity design. The results indicate that direct democracies spend 40–60 percent less on public welfare. Our interpretation is that direct democracy may be more prone to elite capture than representative democracy since the elite's potential to exercise de facto power is likely to be greater in direct democracy after democratization.